Buying Our Second Home - Best Way to Finance

lethalmoney on 14/09/2024 - 12:42
Last edited 14/09/2024 - 14:48 by 1 other user

Hi, I'm just looking for a best option to navigate buying & selling our primary residence.

We currently have a 3 bedroom property in Melbourne suburbs worth approx. $850k, with a mortgage of $340k. We have around 20k in cash, with a top up of 100k from family on top of that.

We are looking to buy a bigger home, approx. price of $900k in a neighbouring suburb, and then try and sell/settle simultaneously or as close as possible our current property.

What is the best course of action in this scenario with our current situation?

Thanks in advance

Financial

Comments

  • askbargain on 14/09/2024 - 12:47
    +5

    You want quality free advice? You’ve come to the right place.

    • lethalmoney on 14/09/2024 - 12:49
      +4

      I realize i may end up with a broker, but I'd rather walk in somewhat edumacated.

      • Stewardo on 14/09/2024 - 18:14
        -2

        Realise

    • HeWhoKnows on 15/09/2024 - 14:47
      -5

      OB is not licensed to provide personal financial advice.
      Anything you say can and will be used against you.

      We recommend you seek the advice of a professional consultant that can take all your financial circumstances into account
      i.e. talk to a mortgage broker or bank loan manager

      "but I'd rather walk in somewhat edumacated."

      You mean Educated????

      You answered this already…
      "We are looking to buy a bigger home, approx. price of $900k in a neighbouring suburb, and then try and sell/settle simultaneously or as close as possible our current property."

  • 87percent on 14/09/2024 - 12:55
    +1

    60 day settlement on one, 30 day settlement on the other

  • AndyC1 on 14/09/2024 - 13:17
    +1

    Sell your current property and then buy. No dramas with finance as the post is written with no mention of non financial issues that have been thought of.

  • JIMB0 on 14/09/2024 - 13:30

    Have you found a house you want to buy yet? How easily/quickly do houses similar to your current house sell?

    • lethalmoney on 14/09/2024 - 13:34

      we are going to an open today, that appears to tick all the boxes. ESR of 800-880k.
      I'm currently in a relatively desirable suburb North Eastern suburbs. The suburb we are looking to move to has less of 'a name' to it… But it is literally 400 meters away.

      • MS Paint on 14/09/2024 - 13:39
        +3

        Ivanhoe and Heidelberg Heights ?

      • freefall101 on 14/09/2024 - 14:48
        +2

        ESR of 800-880k

        Is that a real ESR or a "get people in the door" ESR?

        Make sure to look at the actual prices of places that have sold in the area, and if it's a particularly nice example (if it ticks all the boxes for you, it will for other people too) to take that into account.

      • JIMB0 on 14/09/2024 - 16:36

        I have a feeling this house is going to be more expensive and harder to secure than you think. Might be best to hold off on selling your existing house, especially if it's the type that sells quick.

        • lethalmoney on 14/09/2024 - 17:12

          ESR is agents guide only.
          Will definitely go for low to mid 9's.

          There were 30 groups through the first inspection today, so reasonable interest.

          I think a bridging loan is probably the safest option. Will continue chipping away at improving this house while we find the right house to buy.

  • sumyungguy on 14/09/2024 - 14:31
    +2

    Bridging loan

    • lethalmoney on 14/09/2024 - 14:35

      Have you used one, how did it pan out for you?

      • sumyungguy on 14/09/2024 - 14:39
        +5

        Haven't needed to personally but this is how many people underwrite their property transfers. Otherwise you have to time everything perfectly and more than likely something won't run to plan. So many key transactions aren't within your control. BTW by making a leap sideways, not really an upgrade, you're going to lose bigly on real estate transaction costs.

  • Tee Rex Arms on 14/09/2024 - 15:10
    +3

    100k from family? Wow

    • AustriaBargain on 14/09/2024 - 16:01
      +1

      Born into the wrong family 😔

    • lethalmoney on 14/09/2024 - 17:03
      +7

      Yeah, not exactly received in the best circumstances, though.

  • JimmyF on 14/09/2024 - 15:32
    +1

    We are looking to buy a bigger home, approx. price of $900k in a neighbouring suburb, and then try and sell/settle simultaneously or as close as possible our current property.

    Nearly impossible to time selling and buying so you'll be looking at a bridging loan if you can't borrow the new property. Then you can buy, and then sell the old one.

  • soan papdi on 14/09/2024 - 16:07
    -4

    Sell your house first and discuss with buyer if 6 month settlement is acceptable. Pick a house in the next 4 months and settle quickly.

  • TEER3X on 14/09/2024 - 19:03
    +1

    Lots more stock on the market, appears properties in Melbourne are actually mostly selling within the quoted ESR.

  • SmiTTy on 14/09/2024 - 23:24
    +5

    Most stressful, best financially — try to time your sell right after you buy so you are settling both transactions relatively close so you can move straight in.

    Least stressful, most costly - bridging loan. Buy, move then sell

    Somewhere in between (albeit more hassle) - rent, sell, then buy

  • Andrew0415 on 15/09/2024 - 08:46
    +5

    We went through this and examined a bridging loan but the interest rates are ridiculous and there's a lot of pressure to get the sale done within a certain window. We ended up selling and then renting for 12 months (the cost was about the same as the interest we would have paid on the bridging loan) in the suburb we were interested in which allowed us to 1) see how we liked the suburb and 2) wait until we found the right property (which turned out to be our rental as the landlord was willing to sell).

    By the way, you can earn hefty interest after the sale if you put the money in high interest savings accounts which can offset the rental costs.

    • lethalmoney on 15/09/2024 - 09:19
      +1

      Appreciate the insight. :)

      I think on further review we will sell first. Seems to make the most sense.

      My wife has now said we can bunk in with her dad for a bit while we find the next home. Just means moving twice, but that's not a bad trade off and reduces the pressure to buy in a set window.

      And great point on the high interest 👏

      • jediknight on 15/09/2024 - 18:34

        Do you really need/want to sell? Why not convert it into an investment property, if you can afford the additional repayment? Move in with wife's dad, convert current ppor to IP, extract equity from it, find new ppor and move in.

  • subydooby on 15/09/2024 - 13:04
    +1

    Renovate, extend

    • JakeyJooJoo on 15/09/2024 - 19:47

      After expenses, fees and taxes, legit probably the smarter choice.

      Would like OP to have done the numbers and let us know the difference.

  • dimitryp on 15/09/2024 - 13:43
    +1

    just keep in mind you're "wasting" about $70k+ just by switching houses.
    selling will cost you ~$30k in agent fees and maybe $3k in conveyancing, and when buying you pay 4% stamp duty (so thats $36k for your 900k house). Plus moving costs ($1-2k) and other miscellaneous stuff.

    • ozsave on 15/09/2024 - 14:42

      Exactly. Make sure you add up all the add-on costs to you for buying a new house and selling the existing house as explained above and you may decide its better financially and less stressful to renovate. The fact that you are asking the question should be red flag to begin with.

    • lethalmoney on 15/09/2024 - 15:05
      +1

      Reno + extension was estimated at ~400k.
      Pre-covid would have been nearly half that.

      We have two young kids which also makes that process a bit more difficult.

      (Knockdown rebuild @ 620k)

  • SlickMick on 15/09/2024 - 16:57
    +1

    Personally, I'd be keeping current home, but refinance it whilst getting loan for new home. That will unlock $500K equity, so you have up to $620K deposit on your new home.

    • od810 on 15/09/2024 - 19:10

      They would need total loan of 950k + 340K - 120K cash which might not be possible. Although definitely an option to explore if income can support. Avoid the whole situation of bridging loan and simultaneous settlements

  • m00c0w on 15/09/2024 - 18:50

    I've just gone through a similar process… we bought a place with a decent settlement that would allow us to sell our existing home. Problem was it took a LOT longer to sell than we had anticipated. We started looking down the path of a bridging loan and thing is with that the banks only give you about 70% of your property sale price as part of the bridging and the bridging interest rate is in the mid to high 9% territory. So we were being prepped by the bank to have a substantial amount ready out of our own pocket for settlement. It all eventually worked out without needing to go down the bridging path, but it was all quite stressful. Speak to your bank and conveyancer though, some banks really don't like doing simultaneous settlements or bridging loans. And from your conveyancing team make sure they know what the drill is as well.

  • od810 on 15/09/2024 - 19:02

    My friend got lucky, the new house they bought and the old house were settle on the same day. They managed to ask the new owner for extra 2 days rent to move. You can probably try to buy first and settle with the longest possible tern, then buy the new hone and try to adjust the settlement accordingly. that way you can avoid bridging loan which is usually higher interest.

    Make sure don't overpay the new property and/or overprice your current property, it will give you a lot of unnecessary stress

    Good luck

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